Some Arizona students will get college debt forgiven after AG settlement

Chef instructor Tracy DeWitt makes a ribbon for the Old West Meets New West cake for Scottsdale's 60th anniversary at Le Cordon Bleu College of Culinary Arts in Scottsdale.(Photo: Michael Schennum/The Republic)

More than 6,000 students in Arizona who attended a chain of for-profit colleges will get private student loans forgiven via a settlement with state attorneys general announced Thursday.

More than $22 million will go to affected Arizona students, Attorney General Mark Brnovich said in a statement.

Career Education Corp. engaged in "unfair and deceptive practices" like misleading students about costs, job placement rates, how credits would transfer to other institutions, accreditation and what programs were offered, a press release about the settlement said.

The company operated four campuses in Arizona at one point: Le Cordon Bleu, Sanford-Brown College, Collins College and American InterContinental University.

The settlement applies only to private loans with the school, not federal loans or those held by other companies.

Brnovich said the debt relief settlement will help students who were "saddled with large debts and degrees that were less useful than CEC led its students to believe."

The settlement helps make sure for-profit colleges "better represent the truth to prospective students in the future," he said.

Nearly $500M forgiven nationwide

Nationwide, the settlement brought by attorneys general from 48 states and the District of Columbia will collect about $494 million in debt owed by nearly 180,000 students. As part of the settlement, the company also has agreed to change its recruiting and enrollment practices.

Aside from the four colleges that operated in Arizona, the company ran Briarcliffe College, Brooks Institute, Colorado Technical University, Harrington College of Design, Katharine Gibbs School-Philadelphia and Missouri College.

Most of these campuses have closed. Only American InterContinental University and Colorado Technical University remain open and operate primarily online.

Students are eligible for the debt relief if they attended American InterContinental University or Colorado Technical University and completed classes before Dec. 31, 2013.

How students will receive refunds

Students who attended any of the company's other schools that were closed before Jan. 1 are eligible.

Eligible students should receive notice from Career Education Corp. by mail and won't need to take any further action to receive relief.

The company also must pay $5 million to the states to help fund current and future investigations into fraud by for-profit college operators. Arizona will receive $75,000 of that money to subsidize the investigation into the company.

Career Education Corp. denies wrongdoing

Todd Nelson, the company's CEO, called the settlement "an important milestone" and denied doing anything wrong.

“We have remained steadfast in our belief that we can work with the attorneys general to demonstrate the quality of our institutions and our commitment to students," he said in a statement.

While the attorneys general counted nearly $500 million in debt forgiveness, the company said all but $1.3 million of the uncollected money already was written off in prior years "in the ordinary course of the company's operations."

In total, the company expected the settlement to cost $6.3 million -— the $1.3 million on the uncollected debt and $5 million for the payment to states for current and future for-profit college investigations.

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